4.75% fha vs 5.25 conventional (PMI, loan, interest rate, premium)
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newbie buyer. i got his rate of 4.75% fha vs 5.25% conventional based on my credit score. lender recommend the 4.75 fha. i am a bit confused as i know fha will have pmi for 30 yrs.
can someone shed a light on this. if i have 0.5% interest difference between fha and conventional, should i go with fha?
newbie buyer. i got his rate of 4.75% fha vs 5.25% conventional based on my credit score. lender recommend the 4.75 fha. i am a bit confused as i know fha will have pmi for 30 yrs.
can someone shed a light on this. if i have 0.5% interest difference between fha and conventional, should i go with fha?
thanks,
I could be wrong but I believe PMI goes away when you got 20% into the house not for the full 30 years
newbie buyer. i got his rate of 4.75% fha vs 5.25% conventional based on my credit score. lender recommend the 4.75 fha. i am a bit confused as i know fha will have pmi for 30 yrs.
can someone shed a light on this. if i have 0.5% interest difference between fha and conventional, should i go with fha?
thanks,
Find out all the fees from the lender.
FHA has a huge upfront mortgage insurance premium in addition to the monthly mortgage insurance premium.
The choice partially depends on how long you will own the home.
As another poster said once you have 20% equity you can cancel PMI.
Depending on your % down FHA may be easier to qualify.
Last edited by beachouse; 03-21-2011 at 04:28 PM..
For FHA, it's MIP, for Conventional, it's PMI. What makes you think you're not going to have PMI for a conventional? ANy loan without 20% equity will have mortgage insurance. If you do conventional and do a second lien, the interest rate on the second nearly offsets the amount of the PMI.
No, it doesn't automatically go away at 20%. It will automatically go away at 22%. If you want it gone at 20%, you have to approach them and ask for it to be removed.
Even if you reach the 20% or 22% LTV you still have to pay the MIP, or PMI, whatever FHA calls it, for at least 5 years. This happened to us on one of our former homes we owned. Can you go USDA? There are income and location guidelines but there is no PMI, or MIP and the rate is comparable to FHA.
newbie buyer. i got his rate of 4.75% fha vs 5.25% conventional based on my credit score. lender recommend the 4.75 fha. i am a bit confused as i know fha will have pmi for 30 yrs.
can someone shed a light on this. if i have 0.5% interest difference between fha and conventional, should i go with fha?
thanks,
Hi Proud2,
Here are some numbers for you to look at.
I'm going to assume the following.
1) Purchase price of $240,000.00
2) Your credit score is 720+
Here is what an FHA loan would look like:
$240,000 - 3.5% down payment = base loan amount of $231,600.00 + the 1% FHA UFMIP (Upfront Mortgage Insurance Premium) gives you a total loan amount of $233,916.00. At 4.75% your PI (principle and interest) payment would be $1,220.22 per month.
Here is what the conventional loan would look like:
$240,000 - 5% down payment = base loan amount of $228,000. At 5.25% your PI (principle and interest) payment would be $1,259.02 per month.
In this case an FHA loan will cost you $38.80 less per month. Take that out 30 years ($38.80 X 360 months) and you save $13,958 in interest over the life of the loan.
A couple of quick points.
1) Your FHA rate should be lower, 4.375% - 4.5%.
2) Generally speaking you almost always want to go with the lowest rate. There are exceptions to this but not many.
1) Purchase price of $240,000.00
2) Your credit score is 720+
Here is what an FHA loan would look like:
$240,000 - 3.5% down payment = base loan amount of $231,600.00 + the 1% FHA UFMIP (Upfront Mortgage Insurance Premium) gives you a total loan amount of $233,916.00. At 4.75% your PI (principle and interest) payment would be $1,220.22 per month.
Here is what the conventional loan would look like:
$240,000 - 5% down payment = base loan amount of $228,000. At 5.25% your PI (principle and interest) payment would be $1,259.02 per month.
In this case an FHA loan will cost you $38.80 less per month. Take that out 30 years ($38.80 X 360 months) and you save $13,958 in interest over the life of the loan.
A couple of quick points.
1) Your FHA rate should be lower, 4.375% - 4.5%.
2) Generally speaking you almost always want to go with the lowest rate. There are exceptions to this but not many.
The problem with this question is that it's missing too much information. How much are you planning to put down? With a conventional, you're looking at minimum 5% or even 10%.
Are there any points or other fees, like origination? Paying points and bank fees will increase the actual cost of the loan.
Both the conventional & FHA will have mortgage insurance premium. In fact, that's what FHA is, a mortgage insurance program. FHA mortgage insurance premiums tend to be cheaper than Fannie, Freddie, or other private insurance.
I am having the same issue ..3.75 fha, 4.25 conventional. now pmi remains for 30 years on FHA
Ask your lender to run numbers for you on what will cost you more over 30 years.
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